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Data opening the door to innovation

By Rich Cooper, Vice President of Research & Emerging Issues, U.S. Chamber of Commerce Foundation
May 31, 2014, 7 a.m.

One of the most powerful fuels to run the world’s innovation engine is data. The spark of insight, the serendipitous discovery, the “aha” moment that leads to new products, stronger businesses, and economic growth is all borne of information. Recognizing that the innovation engine propels our economy forward, it is paramount that we keep the fuel flowing. This can be done, in part, with Open Data.

Open Data is not a “thing” so much as it is a philosophy. It is the idea that free, accessible, unrestricted data is a catalyst for innovation and growth. It is considered a public good, and most often, Open Data is associated with public sector information. For several years now, particularly as our modern capacity to generate and store data increases exponentially, there has been a push by public and private sector leaders alike to release government data — and all the benefits that come with it — into the world.

A study from the McKinsey Global Institute looked at the economic potential in Open Data across seven domains: education, transportation, consumer products, electric power, oil and gas, healthcare, and consumer finance. Collectively, with the use of Open Data, these domains could generate an additional $3 trillion a year. That’s almost 20 percent of the U.S. GDP, and it is the equivalent of Germany’s GDP. Simply opening up millions of datasets to the public can unleash as much annual growth as Europe’s economic leader. If you’re a data scientist, this would be like going to Fort Knox with all of its locked away gold, putting a direct pipeline into it and letting it flow full force into your computer. It is quite the treasure trove.

Critically, there is a difference between “open” and “shared” data. Shared data is inherently restricted, a set amount of information given to specific organizations. Shared data can be a source of revenue or perhaps a way of giving access to information that is too sensitive to share with everyone. Open Data is none of these things. Instead, it is widely accessible, free or low cost, and with few limits on using and distributing the information. It is not made available as a means of generating money but as a way of fostering growth and insight.

There are two often-cited examples of what data can do when handed freely to the country’s entrepreneurs and innovators. In the 1980s, global positioning data was opened to the private sector, and it yielded a new industry that creates GPS products (such as the GPS units you might have in your car or take on a mountain hike to be sure you don’t get lost). Today, with all the navigation and tracking capabilities in our cars, on our phones and anywhere people are on the move, the GPS industry is worth about $90 billion annually. Without Open Data, the world could have left all that money on the table (and may have gotten lost in the process too).

Take also the example of weather data collected and generated by government weather agencies. The free release of that data helped build the commercial weather industry, which includes 350 companies with combined annual revenues around $3 billion. With weather and Open Data, we see the cascading impact of innovation. Increasingly accurate forecasts impact everything from the drive to work to where and how critical infrastructure is built. Open weather data has also led to a host of businesses providing innovative products that deliver weather forecasts (such as the now-ubiquitous smartphone weather applications). All this economic activity creates jobs, increasing income, fostering consumerism and greater connectivity, all while driving the incredible potential of the free market.

Some of the most powerful collaborations are those between the public and private sectors, bringing together the expansive capability of local, state, and federal governments with the ambitions of businesses seeking to advance important national missions while also turning a profit. Fortunately, there appears to be some recognition in Washington that Open Data is not just beneficial but indeed is essential to making the most of Open Data.

Much of the data generated by Congress (e.g., current and past legislation, reports, statements, etc.) is open, and this has given rise to organizations that manage, analyze and distribute that data, such as Govtrack and OpenCongress. Access to this data can certainly drive innovation, but it also contributes to a more informed and engaged electorate when information is at their fingertips.

There is also some appreciation in the Executive Branch for the value of Open Data. U.S. Chief Technology Officer (CTO) Todd Park has described Open Data as critical to realizing the economic power of information. His ideas are informed in part by his experiences as CTO of the U.S. Department of Health and Human Services (HHS). Speaking to CNN, Park said:

“There are a lot of smart of people in HHS, a lot of smart people. There's just many, many, many, many ... more smart people outside HHS. And, so, I think the key there is that if you make data available to everybody else, just by sheer numbers and sheer diversity of who they are and where they are, they will, of course, create many more powerful services and products ... than any group of people in any one organization possibly could.”

By this logic, Open Data is an important element in the future of a prosperous United States. The unprecedented power of this country owes significantly to how a democratic government supports a free market and helps the private sector continue building the largest GDP and strongest tradition of innovation the world has ever seen. Yet, Open Data is not just good for business and economic growth. It also empowers the consumer.

The McKinsey report notes the idea of MyData, a subset of the Open Data concept. It is the notion of sharing data that has been collected about an individual with that individual. McKinsey offers the example of utility companies comparing individual and aggregated statistics to show consumers how their energy use stacks up against their neighbors. Personal healthcare data is another example where sharing MyData with an individual can yield greater understanding of one’s health and habits. In this way, MyData fosters transparency and can give consumers greater insight, encouraging lifestyle changes that have myriad impacts on cost of living and consumerism. McKinsey estimates that more than half the value of the $3 trillion in economic growth will be found in consumer and customer surplus.

Indeed, the benefits to consumers and taxpayers are perhaps the most important elements in Open Data. When a utility company (or healthcare business or indeed, any organization holding “MyData”) freely gives information to the taxpayer and consumer, it enables citizens to better understand how their tax dollars have been spent and customers to make more informed choices. By this, taxpayers and consumers have greater insight into the competitive landscape and are empowered to find cost savings, better products and greater efficiency across the board.

An informed consumer also supports competition; companies with a better product or service at a better price will succeed when consumers make more informed choices. Stronger competition pushes companies to innovate and keep striving to create a superior product – which the rest of the world will want, increasing exports and overall national economic growth. With Open Data, everyone wins.

It is yet another example of why data is such a good thing and offers so much promise and potential. All the excitement around Big Data is justified because of the enormous benefits that can be realized by digging through raw information. Open Data is an important part of this, and the more of it we unleash into the world, the more good it can yield for more people.

The U.S. Chamber of Commerce Foundation Emerging Issues Program, the public policy think tank of the U.S. Chamber of Commerce Foundation, provides research and insight into the emerging issues impacting the free enterprise system and the business community. Through its Scholars & Fellows program, the Business Horizon Quarterly, the Business Horizon Series, and other content platforms and programmatic offerings, the Emerging Issues team seeks to inform business and government leaders as well as proactively drive public debate in a future-leaning manner. For more, visit http://emerging.uschamber.com/blog.